Even as everyone anticipated a sequel to one of the most famous Playstation exclusives, Killzone 2, no one knew what was being done about the 3rd version. The hints are starting to come in, slowly but surely. Jan-Bart Van Beek of Guerilla Games dropped a few words to a Dutch TV program that "Right now, Killzone 3 for a release in 2011, is being developed. Who knows, maybe we'll see the game even as early as 2010."
Killzone 2 already has all the engine groundwork in place, so during the development of Killzone 3 it's probable that more can be accomplished in the creative aspects rather than just technical expansion. Especially considering how complicated the Killzone 2 engine was, it took the developers considerable time to get the coding properly set.
Also, recall that the game's sequel will indeed not head towards the next generation of consoles, and the developers have previously noted that the "Playstation 3 has a very long life ahead still, and we're certainly not done developing for this platform." For the eye candy crowd, this could mean that the engine still has plenty of room to be augmented.
Source: Connected Consoles